CITY FOCUS: Sands' position under threat as investors become increasingly unhappy at poor performance at Standard Chartered

In the dark days of the financial crisis, when discredited banking barons were deposed from their crumbling empires, one man stood aloof.

Peter Sands, the chief executive of Standard Chartered, navigated the chaos with seeming aplomb, He was even hailed as the secret saviour of Britain’s banking sector after a blueprint he drew up to bail out those in difficulty was adopted in 2008 by Gordon Brown.

StanChart, which though London-listed operates mainly in the emerging markets of Asia and Africa, seemed to emerge from the ruins with its reputation and profits virtually intact. But in a dramatic reversal of fortunes, the steady diet of increasing profits that investors have come to expect has ground to a juddering halt.

After eight years at the top, Sands finds his position under threat from restive shareholders.

‘Peter has plenty of intellect and capability, but seeing the shares go from £19 to £12 is not a good place to be,’ said one leading shareholder. Sands and his shareholders have recently found themselves in unfamiliar terrain: disappointing numbers, senior executive departures and a tumbling share price – with the added seasoning of a sizeable revolt over directors’ pay.

Mutterings over the future of Sands, and of the chairman Sir John Peace, reached such a volume that the bank took the unusual step of issuing a public statement backing the pair.

The immediate source of discontent was the shock warning last month that profits for the first half of this year, due to be unveiled on August 6, will fall by around 20 per cent.

In reality, investors’ confidence began to suffer in 2012 when the bank was embroiled in a battle with US regulator Benjamin Lawsky over sanctions-busting with Iran and other rogue regimes.

After initially attempting an aggressive fightback, StanChart capitulated and humiliatingly accepted a monitor to oversee its business in the US. Shareholders were jolted both by the disgrace itself and by the handling of the affair.

At a supposedly routine board meeting this week, rampant speculation over Sands’ future, along with the bank’s growth strategy, must be high on the agenda.

‘Peter is definitely under pressure,’ said another big investor. ‘He needs to have a credible plan, and he needs to tell us what it is.’

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Sands, normally a self-assured individual, seems chastened by the bank’s fall from grace. He has admitted performance has been ‘disappointing’ and believes there are two main problems.

One is the Korean business, where returns have fallen dramatically and growth targets have been suspended. The other is financial markets, which have proved eerily sanguine in the face of various provocations. The emerging markets where StanChart operates have also been hit by worries over the impact of US taper relief, which could lead to capital flight, and by worries about Chinese borrowing. On the latter point, Sands believes fears over China’s debt problems have been over-egged, as Beijing has borrowed domestically to invest, unlike the US, which binged on foreign credit.

The main running sore is boardroom dysfunction. Peace was until recently chairing three big businesses, leading to worries he may not be devoting enough time to StanChart. He recently stepped down from his role at Experian, but still chairs fashion group Burberry. The top team has also been dented by the departure of finance chief Richard Meddings, seemingly in collateral damage from the sanctions-busting scandal.

Meddings, who has been replaced by former Vodafone man Andy Halford, was not only heir apparent to Sands, but also the key liaison man with investors. ‘They did not seem to realise what a lynchpin he was until he had gone. They underestimated him,’ said one.

Despite the undercurrents, shareholders are not making immediate demands to see Sands’ head on a platter. Setting aside his recent problems, over his eight years at the helm Sands has delivered 12 per cent compound annual growth, compared with flat growth at HSBC, shrinkage of 11 per cent at Barclays and a staggering 200 per cent contraction at RBS.

Even if he is outstaying his welcome, there is the problem of who would take over.

The exit of Meddings leaves no obvious internal candidate: deputy chief executive Mike Rees is apparently not in the running and non-executive Naguib Kheraj inspires mixed responses among observers. External candidates are thin on the ground as the financial crisis took out a whole generation of senior bankers, leaving the pool of talent somewhat dry.

‘The root of the malaise is poor communication with us, the shareholders. That is fine when things are going well, but Peter has to work hard now. But the problem with getting rid of him is there is no one there to take over.’

Unless he can convince investors that he can restore the bank to its former stature, time will be running out for Sands.